Arrest disrupts Russia’s stock market

Moscow  Shares in Russia's largest oil firm plunged and dragged the Moscow stock market down with them Monday, the first trading day after the weekend arrest and jailing of the chairman of Russia's biggest oil producer.

President Vladimir Putin defended prosecutors' decision to arrest Russia's richest man, Mikhail Khodorkovsky, whom special forces seized in a stunning operation at a Siberian airport. But fears were high that the move could stall the Russian economy, which recently has seen robust progress back from the 1998 collapse of the ruble.

"Capitalism with Stalin's Face," blared a headline in the daily Nezavisimaya Gazeta. "The prosecutor general has been allowed to turn Russia into a VIP jail," echoed the business daily Kommersant.

Khodorkovsky's arrest was an escalation of the probe into the Yukos oil company that began in July and that many analysts and politicians have speculated is political revenge for the tycoon's funding of opposition parties.

Yukos this month completed arrangements to form what would be the world's fourth-largest oil company by merging with Russia's Sibneft, and it carries a huge influence in Russia's economy. Its shares were down 15 percent at the close of trading; the RTS benchmark index of Russian stocks closed down 14 percent.

Earlier in the day, after Yukos shares lost 20 percent, trading on the Moscow exchange was halted for an hour. The ruble, which this year has made an overall 12 percent rise against the U.S. dollar, dipped 1 percent.

The arrest of Khodorkovsky rattled even risk-hardened foreign investors. Analysts and fund managers in Europe and Russia said that markets badly wanted assurances that the Kremlin wasn't going to reshuffle the privatizations of the 1990s that created some of Russia's biggest companies.

Putin tried to calm fears of a wider-ranging government move against prominent businesses.

"Everyone should be equal before the law, irrespective of how many billions of dollars a person has on his personal or corporate account," Putin said at the start of his regular Cabinet session.

In the wake of the arrest of its leader, Mikhail Khodorkovsky, Yukos oil firm has announced Steven Theede, a former oil executive with Conoco Phillips and a Kansas native, will take over Yukos' daily operations.Theede joined Yukos this year after heading European and Caspian exploration and production for Conoco Phillips, Yukos announced.Theede, from Hutchinson, graduated from Kansas State University.

"Otherwise, we will never teach and force anyone to pay taxes ... and defeat organized crime and corruption," he said.

Putin said Khodorkovsky, whose fortune was estimated at $8 billion by Forbes magazine, was jailed after being charged with tax evasion, fraud and forgery. "I proceed from the assumption that the court had reason to do that," he said.

Russia's top three business associations, which have been careful not to antagonize the Kremlin throughout the Yukos probe, issued a strong appeal to Putin on Sunday, urging him to rein in the prosecutors. Russia's top liberal parties said in a statement that democracy was in danger.